Fig leaf over losers

Nitish Sengupta, the new head of the Board for Reconstruction of Public Sector Enterprises, has a few things going for him. He has seen both the public and private sectors from inside, the former as a civil servant and the latter as a management consultant. With that experience, he makes the suggestion that all public sector units should be mandatorily listed on the stock market in order to discover their true value and leverage this to raise resources for further investment and growth. But he is quick to add that he is not thereby asking for a transfer of management control to private hands. As an example, he cites the case of Coal India, which can unlock a lot of intrinsic value by simply listing. What Dr Sengupta has in sight is the Chinese model, under which state-owned behemoths have raised enormous resources by listing, without the government in any way giving up control. India has its own share of firms that have followed the same route, and benefited. But this solution is applicable only to firms which are intrinsically valuable, which means they must have either the assets or a bottom line which the market finds attractive. Most chief executives have their goals suitably modified once their share prices are quoted daily on the market, and a larger accountability that goes beyond a ministry or minister does help to improve performance "" if not in all cases, then certainly in some of them.

The problem lies in the other notion that Dr Sengupta has put forward, that healthy public sector firms should take over sick ones. He cites the example of BHEL, which took over Bharat Heavy Plates and Vessels. The problem with this approach is that it could mean pouring good money after bad, diverting the attention of the healthy company's management, and perhaps merely postponing the day of reckoning for the company that is taken over. If the intention is to let a superior management run the troubled company, that can be done by getting better managers to do the job, without the government ceding its responsibility to another state-owned enterprise. In any case, a "one size fits all" strategy can hardly be recommended.

The problem with the UPA government is that it survives with the support of the Left, which wants to avoid privatisation or closure for as long as possible. So it may be useful to look at the policy of the West Bengal government towards its sick public sector units. It has divided them into three categories, those that can be carried along, those that can be revived with private participation in the form of joint ventures, and finally those which need to be sold for whatever they are worth, like the Great Eastern Hotel. The Left position is that it is not averse to handover of management provided this kind of grading and step-by-step approach is adopted. The UPA should borrow this leaf from the Left's book.